With the global demand for resources steadily rising, crude oil and natural gas prices have continued to climb in recent years. The Secretary-General of OPEC stated that by 2020, OPEC’s oil supply would increase by 9 million barrels per day, ensuring a sufficient and stable global supply of petroleum products. Meanwhile, the production of oil and natural gas requires vast amounts of steel—particularly in the form of pipes, which make up the vast majority of steel usage, including both welded and seamless pipes. In the author’s view, the significant surge in international energy prices this time around will likely have notable implications for China’s steel pipe export market, making it a topic worthy of careful study.

　　I. Soaring crude oil prices spur oil extraction

　　The ongoing economic growth in the new cycle is one of the main drivers behind rising energy demand. By the end of June 2008, crude oil prices surged past USD $140 per barrel—seven times higher than in 1995, a 170% increase compared to the beginning of 2007, and nearly 100% higher than the same period in 2007.

　　The TOCOM (Tokyo Commodity Exchange) index also shows that, compared to the same period last year, the crude oil index has risen by 80.2%, while the natural gas index increased by 47.1% (Chart 1). Even after adjusting for inflation-driven price increases, crude oil prices continue to climb at a remarkably rapid pace. As clearly illustrated in Chart 1, oil prices have grown faster than natural gas prices since March 2008. However, according to forecasts from international experts, natural gas prices could surge by as much as 50% in the second half of the year.

　　To ensure long-term global oil demand, OPEC increased oil production in regions such as Saudi Arabia, the UAE, Algeria, Kuwait, Qatar, and Libya from 2008 to 2010. By 2010, OPEC’s daily production capacity reached 39.7 million barrels per day—up 11.2% compared to 2007—and its average annual supply grew by 3.5% during the same period.

　　II. Global steel pipe demand is expected to increase by an average of 4 million tons annually over the next few years.

　　Rising prices will encourage energy producers to increase investment and expand production to meet growing demand. Whether it’s the exploration and extraction of oil and natural gas, or their transportation and processing, all these activities require significant quantities of seamless casing pipes, welded casing pipes, and pipeline tubes.

　　OPEC member countries are increasing their energy production, launching a new batch of oil projects. Assuming an average oil density of 0.88, with 1 ton of oil equivalent to 7 barrels, each well produces 20 tons of oil per day. Drilling each well requires 65 kg of oil tubing for every meter drilled, and the average depth of these wells ranges between 700 and 1,500 meters. Notably, oil tubing accounts for approximately 40% of the total steel used in the petroleum industry, while steel pipes themselves make up about 92% of the steel consumed in the oil sector. If we project an average daily production increase of 1 million barrels over the period from 2008 to 2010, OPEC member countries will require roughly 2.243 to 4.805 million tons of steel pipes for their new projects during this time—representing an annual demand increase of 748,000 to 1.602 million tons. Moreover, when factoring in the additional steel requirements for NGLs (Natural Gas Liquids) and other liquefied products, the annual demand for steel pipes could rise by nearly 1.3 to 2 million tons.

　　　Looking at the status of natural gas infrastructure development, global demand for steel pipes used in natural gas pipeline construction (as of 2012) was approximately over 25 million tons. Among these, China’s West-to-East Gas Pipeline Phase II and the Central Asia Pipeline project alone required more than 10 million tons of pipeline tubes, with an average annual demand of 3.5 to 4 million tons—accounting for roughly 50% of global pipeline tube consumption. Meanwhile, natural gas pipeline projects in the Asia-Pacific region, including countries like India and Malaysia, are expected to require around 6 million tons of pipeline tubes, representing about 25% of global consumption. On the international market, annual demand is growing by approximately 2 million tons each year.

　　Based on the analysis of the current status of oil and gas infrastructure projects abroad, the international market is expected to see an average annual increase in demand for steel pipes of approximately 4 million tons over the next few years—clearly indicating strong international market demand.

　　3. Tariff Adjustments Shift the Structure of Exported Products

　　In 2007, Chinese steel pipe enterprises exported a total of 9.36 million tons, accounting for 15% of the country’s overall export volume. As shown in Figure 4, the tariff policy introduced by the National Development and Reform Commission in June 2007 had a significant impact on steel pipe exports. In August 2007, steel pipe exports fell sharply by 25.3% compared to the previous month—specifically, welded pipe exports declined by an even steeper 35.1% during the same period. Meanwhile, the structure of steel pipe export products also shifted: while seamless pipes continued to benefit from the national export tax rebate, their share of total exports surged dramatically, reaching nearly 50%; in contrast, the proportion of welded pipes dropped significantly—from around 50% previously to just about 20%.

　　In the long term, from the second half of 2007 to March 2008, welded pipe exports continued to decline, dropping by as much as 72% compared to the previous period. However, export volumes have gradually rebounded in recent months. Meanwhile, welded pipe export prices have remained on an upward trend, supported by high production costs and robust demand—averaging a monthly increase of 2%, representing a 34% rise compared to the same period last year. As shown in Figure 4, demand for welded pipes has proven stronger than that for seamless pipes, and export demand for welded pipes has demonstrated remarkable resilience.

　　On the other hand, since the tax rate adjustment last June, the export volume of seamless pipes has steadily risen as a share of total steel pipe exports, now accounting for over 50%. In the second half of 2007, steel pipe manufacturers ramped up their production and sales efforts in seamless pipes, leading to a slight oversupply in the market. However, rising raw material costs ultimately pushed market prices higher—albeit with a gradual, oscillating trend.

　　IV. China Sees Rising Number of Anti-Dumping Cases on Steel Pipes, Putting Export Markets Under Pressure

　　In recent years, China has seen a significant surge in exports of steel products, leading to a growing number of anti-dumping and anti-subsidy cases. In response, the National Development and Reform Commission has eliminated export tax rebates for most steel products. Since the tariff adjustments implemented in June 2007, the volume of steel pipe exports has declined noticeably, while the structure of export destinations has also taken on new characteristics.

　　Among China's major export regions for seamless pipes, North America accounts for the largest share, representing about one-quarter of the country's total exports. As of now, exports of seamless pipes to the U.S. alone have already reached 26% of the nation's overall export volume—showing exceptionally rapid growth—while Europe holds a 14% share. On June 26, the European Commission received an industry petition from EU members initiating an anti-dumping investigation into seamless pipes produced in China. If the investigation concludes with the imposition of anti-dumping and countervailing duties on Chinese seamless pipes, China could face a reduction of 300,000 to 400,000 tons in its annual exports. Moreover, the growing volume of exports to the U.S. market deserves close attention from domestic seamless pipe manufacturers. Meanwhile, the Chinese government is also likely to implement policies aimed at reducing or eliminating export tax rebates, in an effort to mitigate escalating trade tensions between China and the U.S.

　　From January to May this year, China’s cumulative production of seamless steel pipes reached 7.4709 million tons, with 1.9492 million tons exported—accounting for 26.1% of the total output. Given this high level of reliance on foreign trade, any reduction or elimination of export tax rebates could significantly disrupt the domestic market.

　　Among the main export regions for welded pipes, North America accounts for 34%, followed by the Asia-Pacific region with 17%. Despite the recent increase in tariffs, exports to the U.S. have not significantly declined, thanks to the rapidly growing demand for steel products in the U.S. market.

　　On June 20, the U.S. ITC ruled that circular welded carbon steel pipes exported from China to the U.S. have caused material injury to the domestic industry. This move delivers a significant blow to Chinese steel pipe manufacturers, as the U.S. will impose hefty tariffs on these products imported from China over the next five years. The anti-subsidy rates will range from 30% to 616%, averaging 37.2%, while the anti-dumping duties will be between 69% and 86%. Meanwhile, Canadian companies have also initiated an anti-dumping and countervailing duty investigation into welded pipes originating from China with Canada's Border Services Agency (CBSA).

　　Once the North American market is lost, China's welded pipe exports will decline by 1.5 to 2 million tons annually. A reduction in exports will inevitably put pressure on the domestic market. But will this impact be significant? From January to May 2008, China’s cumulative production of welded pipes reached 9.1779 million tons, with 1.273 million tons exported—accounting for 14% of total output. Notably, the North American market alone accounted for just 3.1% of the country’s overall production. These figures clearly indicate that welded pipes are far less reliant on exports compared to seamless pipes, meaning that shifts in the export market are likely to have a relatively minor impact on the domestic market.

　　Welded steel pipes are primarily manufactured using electric welding, which consumes significant amounts of electricity. In June, domestic electricity prices rose by 1.7 cents per kilowatt-hour compared to the same period last year—clearly impacting weld pipe producers. Moreover, with relatively few new weld pipe projects being launched domestically and the onset of summer's intense heat, weld pipe production is expected to decline.

　　In summary, the author believes that, without a significant decline in welded pipe exports, the domestic market may face a tight supply situation, keeping prices elevated.

　　Meanwhile, the high degree of foreign trade dependency means the seamless pipe market is increasingly influenced by how the country responds to shifts in export markets and what policy measures it adopts.